Bidhata Industries, P.K. Vs. Commissioner of Central Excise - Court Judgment

Excerpt:
2. bidhata industries, the assessee, processed fabric that it received on payment. notice issued to it and its employees proposed denial of deemed credit that it took on the ground that the fabric that it received had already been subjected to processing and hence excluded in terms of notification 29/96. the notice relied upon statements of various employees of raymond ltd. to say that the fabric had already been subjected to processed solvent scouring. the notice also alleged that the appellant had not included in the cost of processing, the amounts incurred on account of double decatizing. penalty was proposed on this count. the additional commissioner confirmed the proposal in the notice and imposed penalty. the commissioner (appeals) has dismissed the appeal against this order for failure by the assessee to deposit the entire duty and penalty and by its employees to deposit the penalty.3. the contention on behalf of the assessee is that the process of solvent scouring tat was undertaken on the fabric by raymond ltd. (which manufactured it), is done only wit a view to remove stains that appeared upon the fabric during the course of weaving and is therefore not a process. counsel for the applicant emphasises that the process is only in the nature of washing process, and has no lasting or permanent effect. he relies upon the judgment of the supreme court in sidheshwari cotton mills v. cce 1989 (39) elt 498 to say that the processes referred to in note 2 to chapter 55 has been those which are lasting in character. the affidavit of k.n. jagdish, senior manager, quality control of raymond ltd., affirmed on 7^th march 2003 and submitted to us, makes a categorical averment that this solvent scouring only removes the loom oil stains and other impurities in order to render the fabrics suitable for being subjected to other process. if, as is claimed, the process is akin to washing or cleaning, it would be difficult to consider it as being a process within the meaning of the note. the departmental representative's reliance upon the statement of sudhir uchil, deputy manager, does not really help. we do not prima facie find it possible to agree that uchil has said that the process carried out on the fabric that was sent to the appellant amounted to anything other than scouring. we are of the view that the commissioner (appeals), after considering the evidence that may be produced by either side, shall determine the actual nature of the process to which the fabric was subjected and decide, having regard to the subsisting decisions, whether it amounts to a "process" that would attract the provisions of the relevant note to the chapter.4. on the question of valuation, counsel for the appellant accepts that double decatizing charges having been specifically included while arriving at the cost of manufacture. he however says that the price at which the appellant sold the goods which was based for the duty by the appellant was not the cost of manufacture, but the price at which the fabrics were sold by raymond ltd. to its dealers and this is substantially higher than the cost of manufacture, including the cost of double decatizing. he produces certificates by v.b. dalal & co., chartered accountants, certifying the cost of processed fabric ranging from rs. 70.85 to rs. 78.55 per l.mtrs. raymond's sale price ranged from rs. 97/- to rs. 101/- and the assessee paid duty at either rs. 94/- or rs. 97/-.5. we are satisfied that, with regard to both the issues, the appellant has made out a strong prima facie case. accordingly we allow these appeals, set aside the impugned order and remand the matter to the commissioner (appeals) decide on both the issues, in accordance with law. either side is at liberty to submit evidence.

Judgment:
2. Bidhata Industries, the assessee, processed fabric that it received on payment. Notice issued to it and its employees proposed denial of deemed credit that it took on the ground that the fabric that it received had already been subjected to processing and hence excluded in terms of notification 29/96. The notice relied upon statements of various employees of Raymond Ltd. to say that the fabric had already been subjected to processed solvent scouring. The notice also alleged that the appellant had not included in the cost of processing, the amounts incurred on account of double decatizing. Penalty was proposed on this count. The Additional Commissioner confirmed the proposal in the notice and imposed penalty. The Commissioner (Appeals) has dismissed the appeal against this order for failure by the assessee to deposit the entire duty and penalty and by its employees to deposit the penalty.

3. The contention on behalf of the assessee is that the process of solvent scouring tat was undertaken on the fabric by Raymond Ltd. (which manufactured it), is done only wit a view to remove stains that appeared upon the fabric during the course of weaving and is therefore not a process. Counsel for the applicant emphasises that the process is only in the nature of washing process, and has no lasting or permanent effect. He relies upon the judgment of the Supreme Court in Sidheshwari Cotton Mills v. CCE 1989 (39) ELT 498 to say that the processes referred to in note 2 to Chapter 55 has been those which are lasting in character. The affidavit of K.N. Jagdish, senior manager, quality control of Raymond Ltd., affirmed on 7^th March 2003 and submitted to us, makes a categorical averment that this solvent scouring only removes the loom oil stains and other impurities in order to render the fabrics suitable for being subjected to other process. If, as is claimed, the process is akin to washing or cleaning, it would be difficult to consider it as being a process within the meaning of the note. The departmental representative's reliance upon the statement of Sudhir Uchil, deputy manager, does not really help. We do not prima facie find it possible to agree that Uchil has said that the process carried out on the fabric that was sent to the appellant amounted to anything other than scouring. We are of the view that the Commissioner (Appeals), after considering the evidence that may be produced by either side, shall determine the actual nature of the process to which the fabric was subjected and decide, having regard to the subsisting decisions, whether it amounts to a "process" that would attract the provisions of the relevant note to the chapter.

4. On the question of valuation, counsel for the appellant accepts that double decatizing charges having been specifically included while arriving at the cost of manufacture. He however says that the price at which the appellant sold the goods which was based for the duty by the appellant was not the cost of manufacture, but the price at which the fabrics were sold by Raymond Ltd. to its dealers and this is substantially higher than the cost of manufacture, including the cost of double decatizing. He produces certificates by V.B. Dalal & Co., chartered accountants, certifying the cost of processed fabric ranging from Rs. 70.85 to Rs. 78.55 per l.mtrs. Raymond's sale price ranged from Rs. 97/- to Rs. 101/- and the assessee paid duty at either Rs. 94/- or Rs. 97/-.

5. We are satisfied that, with regard to both the issues, the appellant has made out a strong prima facie case. Accordingly we allow these appeals, set aside the impugned order and remand the matter to the Commissioner (Appeals) decide on both the issues, in accordance with law. Either side is at liberty to submit evidence.